Does My Business Insurance Cover against Sewer Backups?

(Find out if and how your policy protects you against the messiest potential risks.)

Business Sewer Backup

As a responsible business owner, you have to consider all potential risks to your business, from the obvious to the most disgusting. Which means it’s important to get your business protected from the very beginning against disasters that could cause much more than just a financial mess. So what happens if your store is closed for a few weeks due to a sewer backup, does your business insurance protect you? The good news is that we know, so you don’t have to.

Independent insurance agents know all about business insurance and the coverage you need against all potential disasters, too. They know exactly how to protect your business against sewer backups and all other messy disasters, and they’ll get you set up with all the coverage you need long before you need it. But before we get ahead of ourselves, let’s take a closer look at business insurance and how it might cover sewer backups.

What Happens If My Store Is Closed Due to a Sewer Backup?

Well, that depends on whether you have the right coverage. Standard business insurance policies typically do not provide protection for sewer backups by default. Instead, this coverage needs to be purchased as a special endorsement or add-on. There are two basic types of sewer backup endorsements, one that covers your own sewer backups, and one that covers backups stemming from your neighbors or anyone else.

The reason standard business insurance policies don’t include coverage for sewer backups is because typically these events happen due to maintenance-related issues. Business insurance doesn't protect against failures by a business owner to keep up routine maintenance, including on sewage lines. The other reason sewer backups typically occur is due to a flood, which is another peril not covered by business insurance.

What Is Loss of Income Coverage?

Business income coverage, formerly known as business interruption coverage, helps a business by paying for its continued expenses (e.g., payroll and bills) when operations are temporarily suspended due to a disaster. The cause of the interruption must be a covered peril under the business insurance policy in order for the business to qualify for reimbursement, though, which is why in the event of a sewer backup, you’d need that special endorsement.

Loss of income coverage usually has a waiting period before reimbursement begins, and it’s typically 48-72 hours after the disaster first occurs. So, after operations have been suspended for this length of time, loss of income coverage starts helping the business to recover lost income. Your policy also limits the amount of time this coverage is in effect, known as the restoration period. Restoration periods can range from a standard 30 days to 360 days with added endorsements.

What Doesn’t Business Income Insurance Cover?

Though business income coverage helps protect businesses against lost income for many common reasons, it doesn’t protect against all losses. The following expenses are not covered under business income insurance:

  • Utility expenses
  • Communicable diseases or viruses and pandemics
  • Undocumented income
  • Damaged inventory due to covered events
  • Flood damage or earthquake/mudslide/landslide damage
  • Expenses that occur during the waiting period or after the restoration period ends

If you’re concerned about any of these areas in which your business income insurance won’t cover lost revenue, talk with your independent insurance agent to get the protection you need.

What Kind of Sewer Backup Coverage Do I Have?

To answer this question, you’ll have to review your specific business insurance policy. The best way to do this is to work with your independent insurance agent. They’ll be able to tell you if your business insurance policy includes coverage for sewer backups at all, and if so, which kind you have. They can also help you add this important coverage endorsement in the event you haven’t already.

What Else Does My Business Insurance Cover?

While sewer backups aren’t an included peril under standard business insurance policies, fortunately, many common disasters are covered. Standard business insurance policies include at least the following types of coverage:

  • Workers’ compensation: Covers financial losses if your employees become ill, get injured, or die from a work-related incident. Coverage is mandatory in most states, depending on company size and the type of work being performed.  
  • Property insurance: Covers loss of or damage to your physical property, including your office space’s structure and inventory. Protected mishaps include fires, storms, and more.
  • General liability: Covers property damage or injury claims made by a third party. 
  • Business auto: Covers company vehicles against perils like theft, vandalism, and natural disasters.

While these are the typical coverages included in standard business insurance policies, you may need additional coverage to fully protect your unique business. Your independent insurance agent can help you identify and fill any gaps in your coverage.

What Doesn’t My Business Insurance Cover?

Aside from sewer backups, standard business insurance policies have two main perils that are never covered, flood damage and earthquake damage. Special flood insurance and earth movement policies would be required to protect your business from damage and/or suspended operations caused by these types of disasters.

If your store is located in an a coastal area or somewhere that’s otherwise prone to flooding, your mortgage lender may actually require you to purchase flood insurance. Otherwise, flood insurance is still good to have if you’re in a flood-prone area. Coverage is only available through the National Flood Insurance Program, which is a part of FEMA. Likewise, if your store is in an area prone to earthquakes, landslides, etc., you’ll want to consider an earth movement policy.

Which Additional Coverages Should I Consider?

To cover common claims and risks that extend beyond the coverage provided by standard business insurance policies, you may need to purchase additional coverages or endorsements. Getting your business set up with all the protection it needs from the start is the best way to ensure smooth operations for many years to come.

The following coverages are commonly added on to business insurance policies:

  • Cyber liability: Covers data breaches and other attacks a business suffers at the hands of cybercriminals. This coverage is becoming increasingly important as more business operations take place digitally.
  • Crime insurance: Covers losses due to criminal activity such as theft or fraud. Coverage also applies to employees who steal from the company.
  • Boiler & machinery: Covers electric equipment in the building (e.g., AC units and boilers) that breaks down due to power surges, etc.
  • Professional liability:  Covers claims made by clients who have suffered financial loss due to the work they've hired you for. Professionals such as consultants and lawyers typically need this coverage.

Working with your independent insurance agent is the best way to identify all areas where your business may be lacking important coverage.

Here’s How an Independent Insurance Agent Would Help

When it comes to protecting your business against gross sewer backups and all other risks, no one’s better equipped to help than an independent insurance agent. These agents search through multiple carriers to find providers who specialize in business insurance and add-on coverages, deliver quotes from a number of different sources, and walk you through them all to find the best blend of coverage and cost.

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TrustedChoice.com Article | Reviewed by Paul Martin

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